A Genuine Return on Investment: The Economic and Societal Well-being Value of Land Conservation in Canada

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1 A Genuine Return on Investment: The Economic and Societal Well-being Value of Land Conservation in Canada Prepared by Mark Anielski, John Thompson and Sara Wilson february 2014

2 Executive Summary How does land conservation contribute to Canada s economic and societal well-being? This study provides a business case analysis of the economic, ecological and societal value of conservation programs, with a focus on the magnitude of economic returns on investment from federal and provincial government conservation funding initiatives. Using Ducks Unlimited Canada (DUC) as the basis for this analysis, the report assessed the broadest suite of societal well-being impacts resulting from the conservation activities of DUC between 2008 and This included an analysis of the impacts to the Canadian economy (measured in terms of Gross Domestic Product (GDP), employment, government revenues, recreation and tourism benefits), ecosystem services (ES) and other societal well-being impacts. Measures of performance include the returns to societal well-being for every $1 invested in conservation of wetlands and natural areas and a comparison of the jobs created for every $1 million invested in conservation programs relative to other sectors in the economy. The study also includes an analysis of the return on investment (ROI) to provincial and federal government dollars invested in DUC s conservation efforts. Finally the report provides an accounting for the Societal Well-being Returns on Investment (SW-ROI) for every dollar expended on protecting wetlands and other natural areas relative to the societal well-being values, both economic and ecological. Results of the business case analysis for the conservation of lands by DUC between 2008 and 2012 are summarized below. As of 2012, DUC has secured and maintains roughly 2.54 million hectares of wetlands and natural lands (uplands) across Canada. In addition, DUC has influenced over 38.9 million hectares of other wetlands and natural areas in partnership with other conservation organizations, governments, communities and First Nations. It should be noted that this analysis is a preliminary and partial account of the total societal well-being benefits of DUC s conservation efforts. Several ES have yet to be evaluated for wetlands and natural areas. Economic Benefits DUC s expenditures averaged $93.5 million per annum between 2008 and 2012 to secure, restore and maintain wetlands and other natural lands. These expenditures resulted in several direct economic benefits to Canada s economy, including: S $77.1 million in GDP ($1.06 in GDP per $1 in DUC operating expenditures, less land securement costs) S 969 person-years of employment (PYE) S $59.6 million in employment income S $15.8 million in operating profits for Canadian business

3 Recreation and Tourism Benefits The 2.54 million hectares of wetlands and natural areas secured and managed by DUC contributes to Canada s recreation and tourism sector. Benefits include household expenditures on travel, equipment, lodging, food and other nature-related recreation expenditures. These contribute directly to local, regional, provincial and Canada s economy. An estimated $208.5 million per year is the value of nature-related recreation on the conservation lands secured by DUC for the benefit of all Canadians. Employment Benefits Every $1 million invested in the conservation of lands for habitat, ecological and socio-economic benefits generates more employment than most comparable sectors in the economies of British Columbia (BC), Alberta (AB), Saskatchewan (SK), Manitoba (MB) and Ontario (ON), including the oil and gas extraction industry in AB, the automobile industry in ON, the agriculture (crops and livestock) industry in SK and the forestry and logging industries in all provinces. In ON, $1 million invested in wetland and natural areas conservation by DUC generates an estimated 14.8 personyears of employment (PYE), which exceeds employment benefits in ON s agricultural sector (12.1 PYEs per $1 million investment), forestry (8.4 PYEs), automobile manufacturing sector (5.8 PYEs) and mining (0.8 PYEs) Employment (PYEs) per $1 Million in Investment Fishing, Hunting, Trapping Construction Industry Land/Habitat Conservation (DUC) Agriculture Forestry Auto Industry Mining Ontario: Employment per $1 Million in Investment

4 In AB, $1 million invested in wetland and natural areas conservation by DUC generates an estimated 12.8 PYEs of employment per $1 million invested in conservation programs. This exceeds employment benefits for the agriculture sector (6.5 PYEs per $1 million invested), forestry (6.4 PYEs), mining (2.8 PYEs) and oil and gas extraction (2.1 PYEs) Employment (PYEs) per $1 Million in Investment Fishing, Hunting, Trapping Land/Habitat Conservation (DUC) Agriculture Forestry Mining Oil & Gas Extraction Alberta: Employment per $1 Million in Investment The Value of Winter Wheat Production on the Prairies DUC is supportive of winter wheat production in AB, SK and MB. In 2011, 540,486 hectares (1,335,000 acres) of winter wheat were planted across the Prairie provinces. Based on average net revenues (returns to equity) from winter wheat production of $79.72/ha ($32.26/acre) in AB in 2011, the estimated total value of winter wheat production across the prairies in 2011 exceeded $43 million. These values cannot be directly attributable as a benefit to DUC s conservation efforts but do contribute an economic and societal benefit. The Cost of Securing, Enhancing and Maintaining Conservation Lands Between 2008 and 2012, DUC spent $132.4 million ($26.5 million per annum) to secure 301,220 hectares of conservation lands for an average cost of $440/ha. These costs included the purchase price and value of donated titles and conservation easements, the costs associated with management agreements and leases, plus the direct labour by DUC to secure these lands. Enhancement/restoration costs between 2008 and 2012 totaled $54.1 million or an average $10.8 million per year. Management or maintenance costs of existing secured wetlands and natural areas (2.54 million hectares) totaled $48.0 million between 2008 and 2012, or an average annual expense of $9.6 million per year. Finally, extension costs associated with retaining existing habitat, including expenditures on influenced lands shared with other conservation organizations and governments totaled $49.2 million between 2008 and 2012, for an average annualized cost of $9.8 million. Value of Ecosystem Services Wetlands and natural areas secured and managed by DUC contribute ES benefits to society. These ES benefits include carbon capture and storage, water purification, regulation of water flows, erosion prevention, waste and nutrient filtration, biodiversity and wildlife habitat, pollination, biological control and food.

5 The total value of these ES associated with DUC s 2.54 million hectares of wetlands and associated uplands (forests, grasslands, croplands) is estimated at $4.27 billion per annum. The highest ES values are for wetlands ($3.10 billion or an average of $2,439.42/ha/yr), followed by forests (deciduous, coniferous, mixedwood) at $808.8 million ($2,223.75/ha/yr), grasslands at $363.9 million ($403.15/ha/yr) and cropland values at $456,355 ($213.66/ha/yr). This works out to an average of $1,682.41/ha/yr ($681.11/acre/yr) for the ES values of the total secured wetland and other land base of DUC. The key ES values are climate regulation representing 31% of the total ES benefit value, followed by water supply/ filtration (29%), waste treatment and water purification (19%) and pollination (9%). 1% Erosion Prevention 1% Biological Control 2% Food 31% Climate Regulation (Carbon Sequestration and Storage) 2% Maintenance of Genetic Diversity 6% Regulation of Water Flows 9% Pollination 29% Water Supply 19% Waste Treatment and Water Purification Total Economic Value to Society The total economic value (TEV) to society related to DUC s efforts in securing and maintaining wetlands and natural areas includes: a) economic benefits to GDP of DUC s activities ($77.1 million), b) recreation and tourism benefits ($208.5 million) and c) ES benefits ($4.3 billion). The TEV associated with DUC s conservation efforts between 2008 and 2012 averaged $4.55 billion per year. Value to Government Investment in Land Conservation Between 2008 and 2012, federal, provincial and municipal governments contributed an average of $15.9 million to DUC s conservation efforts and recovered $1.9 million in tax revenues from DUC-related expenditures, for a net government contribution of $14.0 million per annum. For every $1 in government spending the estimated total economic value to society (including GDP, recreation benefits and ES benefits) generated is $325.

6 Returns to Government Taxes from Conservation Expenditures One dollar of federal and provincial government funding to DUC between 2008 and 2012 generated roughly $1.82 in income tax, corporate tax and sales tax (GST/PST) revenues to both levels of government. Put another way, between 2008 and 2012, federal and provincial government funding of DUC averaged $14.3 million per annum and generated $26.1 million per year in tax revenues to federal and provincial treasuries that can be broken down as follows: S $6.8 million in income taxes paid by DUC employees in 2012; S $14.3 million in income taxes paid by the $59.8 million in employment created in the economy by DUC expenditures; S $3.3 million in corporate income taxes paid by business directly impacted by DUC activities, and; S $1.7 million in sales tax revenues (GST/HST/PST) paid on DUC s operational goods and services expenditures. On balance, Ducks Unlimited Canada activities generated substantially greater tax revenues than the government subsidies provided to DUC. Societal Well-being Return on Investment (see next page) A Societal Well-being Return on Investment (SW-ROI) was estimated to account for the comprehensive economic, social and environmental well-being benefits of conserving and maintaining wetlands and other conservation lands. Similar to the calculation of a ROI for business performance analysis, the SW-ROI provides investors the ability to assess relative returns, expressed in monetary terms, for every dollar of land conservation effort. A SW-ROI of 22 was calculated for the average area of land conserved by DUC, that is, for every $1 invested in the securement, restoration and regular management of a hectare of wetland and natural land conserved by DUC, society receives a $22 benefit in terms of economic, ecological and societal well-being. Future Accounting for Returns to Natural Capital Asset Investments This study establishes a precedent for assessing the business case for the economic, ecological and societal wellbeing value to governments and society from investments in conservation programs that secure, enhance and maintain wetlands and other natural areas. This study is a starting point for better human, social and natural capital asset accounting and management by conservation organizations in Canada. The study provides a benchmark for how conservation organizations, governments and business can begin to account for the conservation of lands as investments in natural capital assets on their respective balance sheets. The results of the analysis should be considered incomplete in so far as not all ES and societal well-being benefits from wetlands could be evaluated. Future accounts of the societal well-being value of conserving these natural assets will be necessary to verify the quality, quantity and monetary value of these assets. This should include regular assessments of the ecological state of the conserved lands, including assessment of degradation or impairment of the ecosystem functions of wetlands and natural areas.

7 average annual Societal Return on Investment from Ducks Unlimited Canada s Conservation Work other u.s. u.s. federal government canadian fundraising grants, land and easement donations other canadian municipal governments canadian government provincial governments $ 6.3 $ 8.0 $ 1.6 $ 1.4 $ 23.4 $ 20.4 $ 20.4 $ 15.6 million million million million million million million million $26.1 million in tax revenues on employment income and business profits recycled back to federal/provincial governments land purchasing $ 20.9 million EXPENDITURES $93.5 MILLION land maintenance and operating costs $ 72.6 million For every $1 invested in land conservation by DUC, society enjoys $22 in well-being nature-related recreation and tourism $ $ 4.27 million ecosystem services billion benefits. $ 15.8 million gdp $ 77.1 million total economic value to society: $4.55 BILLION/YEAR business profits employment $ 59.6 million, salaries 969 jobs

8 Ducks Unlimited Canada conserves, restores and manages wetlands and associated habitats for North America s waterfowl. These habitats also benefit other wildlife and people.